“Venture Capital will be disrupted, sooner than we think” – Llew Claasen, Newtown Partners
Newtown Partners Co-Founder, Llew Claasen speaks about Bitcoin, Disrupting Venture Capital, and blockchain-based businesses. At Startup Grind Chat between Liew Claasen and Who is
AD: At your Startup Grind chat, you mentioned the Venture Capital would be disrupted in and of itself. Why and how?
LC: With blockchain having taken such significant roles in our lives, and the advent of ICOs, blockchain technology has enabled entrepreneurs looking for funding, to find it more readily, and in greater amounts.
The principle is, there no longer a need for centralized stores of funding. There is now access to a wider pool of funding.
Blockchain technology also highlights the global force of cash coming in from people as a force, as opposed to traditional finance houses being in control of most of the money.
AD: You mentioned ICOs, how does that process work? How does one, competing with many others, ensure that they get their piece of the pie, as with traditional shares in the company?
LC: Yeah. So, it is actually a very simple process. The first thing you do is register as a backer. The individual receives an information pack, like a prospectus, where you are then informed of the nature of the offering. Then you fill in your details – address, and so forth – and then you give your desired amount. All of this is done in an automated process, and records are kept. So, as you can see, in some respects it is not different at all to the traditional system. Of course, some tenets will stay the same.
AD: Is Newton Partners then moving from the traditional type of VC into more ICO-based offerings and funds?
LC: Yeah. So, Newtown Partners is in fact shifting, and has been for a while, to a blockchain-based model of funding. We believe in becoming specialists in blockchain-based funding and finding ways for companies to implement blockchain solutions to make their current businesses more efficient in this constantly changing world of technology.
To add to that, the fund structures that we see today will become obsolete.
AD: Obsolete? Speak a bit more to that.
LC: Yeah, so I mean the nature of current VC funds. Now, when you invest in a VC fund, you lock your capital up for about 8 years, right? Whereas with Blockchain-based funds, one can pull their money out every quarter if they wish, with little to no restrictions on capital movement.
But to add to that, investors also have a myriad of opportunities to choose from in the blockchain world, this you can see with the incredible amount of ICOs we have daily.
On the side of entrepreneurs: with the traditional fund structure, it was the funds who had the advantage over entrepreneurs, they had the capital and the power. Whereas now, with more options available in terms of funding to entrepreneurs, it is now funds that must compete for the entrepreneur’s attention – the best fund wins! Hedge funds that specialize will win.
AD: Most of your current investee companies are not blockchain-based though. Why is that?
LC: That was simply just a function of time. Nothing else. We started out as a traditional VC firm, but also because, the blockchain industry back then (and even now) is still quite immature. So, investors are still a bit skeptical.
AD: Interesting stuff. You mentioned earlier that, Newtown Partners aims to be a specialist in making businesses more efficient by using blockchain technology. Speak a bit more to that.
LC: Yeah, so that will be part of the value-add of Newtown Partners. To clarify, we are not aiming to be a consulting firm or anything, but we will be specialists in enabling companies to unlock their potential with the use of blockchain technology.
AD: When selecting companies to invest in the blockchain world versus the traditional banking world, how does the criteria differ or is it the same?
LC: Yeah. So, the fundamentals to a good business would not really change. Principles are principles. But within a blockchain-based business, the questions are more along the lines of “Is it possible to use the tech in a new way or not? What the available resources? The level of the product? Pretty much the same questions as normal businesses. We are still working on a framework for blockchain-based businesses.
But having said that, blockchain-based businesses, because of the immature nature of the blockchain do tend to be a little bit more work than normal businesses. A lot of them are ‘quite early’ as well (early, as in, ahead of current times, not stage of business), so they are not quite ready for retail investors.
AD: So, where does most of your investment come from then? Institutional guys?
LC: Yeah, most of our investors are institutional guys. International cryptocurrency hedge funds and the like, yeah.
AD: Back to ICOs, do you ever worry about FUD affecting any of the tokens that you have or will launch?
LC: Not really. What we have learned from previous experience, is that the noise of those who spread FUD, is dwarfed by the economic participation of our clients and potential clients.
AD: To end of Llew, as someone who got into Bitcoin as early as 2012, what do you make of it, and are you "long" on Bitcoin?
LC: I think Bitcoin has the potential to change lives. It has already. I am long Bitcoin, but in the short-term we will see a lot of volatility, especially, because institutional investors are just beginning to test the crypto waters, and a lot of them, still see Bitcoin as a fad.
As such they will, no doubt, try and trump Bitcoin as much as possible. But in the longer term, yes, I am very bullish on Bitcoin! It does have its challenges, in terms of scaling etc. But it remains a good store of wealth.
AD: Awesome, Llew. Thanks for the informative session. It was great hearing your perspective. Hopefully, when I am rich enough I can invest in one of your funds (laughs).
LC: Ha-ha, yeah! You must work hard. Thank you for your time!